US close: Dow Industrials clocks in with biggest gain in five years

Wall Street ended the week on a mixed note but only after a post-election surge that saw the biggest weekly gains for the main equity benchmarks for several years.

Nevertheless, while stocks were the main beneficiaries of the surprise election victory by Donald Trump, some data appeared to indicate that global fund managers were either undecided or mixed on how to proceed following Tuesday night´s unexpected result.

The Dow Jones Industrials tacked on 0.21% or 39.78 points to end at 18,847.66 on Friday, the S&P 500 drifted lower by 0.14% or 3.03 points to end at 2,164.45 and the Nasdaq Composite added 0.54% or 28.32 points to finish at 5,237.11.

To take note of, Goldman Sachs´s equity strategists estimated that each percentage point reduction in the US corporate tax rate was worth $1.50 of S&P 500 2017 earnings per share, Bloomberg reported.

For the week as a whole, the Dow Industrials advanced 959 points - its best weekly performance in five years - while the S&P 500 rose 3.8% and the Nasdaq-100 was up 1.5%.

Financial Analyst Connor Campbell at Spreadex commented: “The markets remained a mess this Friday afternoon, a variety of different post-election interpretations causing the trading boards to become increasingly splashed with red.”

He added that despite the Dow Jones failing to build on yesterday’s “historic high” it may regain ground after the European markets close as it “has consistently proved it has spare pockets of fuel late into the last few US sessions.”

Campbell's observations were confirmed by the results Bank of America-Merrill Lynch 'flash' Fund Managers Survey, released the day before, showing investors had mostly chosen to sit on their cash piles following Trump's victory, with the remainder evenly split between those who increased their liquidity as a precaution and those who deployed some of it.

Some asset classes, such as bonds and cyclicals, had also already reached so-called 'overbought' levels, BofA-Merrill said in a separate report.

Yet by the close of trading in New York banks had added another 1.0%.

Oil prices took a hit, with West texas Intermediate down by 47 cents to $48.23.

Significantly, Federal Reserve Vice Chairman Stanley Fischer spoke at the Central Bank of Chile on Friday, outlining the central bank’s plan for monetary policy going forward.

According to Fischer, the US has almost reached its goals for maximum employment and price stability, strengthening the case for raising interest rates. He also said the case for removing accommodation is “quite strong”.

Consumer sentiment in the US improved more than expected in November, hitting its highest level since mid-2016. The University of Michigan’s preliminary consumer sentiment index rose to 91.6 in November from 87.2 the month before and 91.3 in the same month last year, beating expectations for a reading of 87.5.

US economist at Capital Economics Andrew Hunter was however sceptical of the findings. “This index hasn’t been a very good guide to consumption growth recently, and we suspect that growth of closer to 2% is more realistic, especially if the election result ends up having a more adverse impact on confidence than the pre-election data suggest,” said Hunter.

For Richard Curtin, the chief economist behind the UofM survey: "These increases must be replicated before they can be taken to indicate a troublesome development; thus far, the data has simply repeated the March 2016 peaks. Nonetheless, it may be viewed as added justification for next month's expected interest rate hike. [...] Unfortunately, the November data must be accompanied by the proviso that it was collected before the result of the Presidential election was known late Tuesday."

The dollar index ended the day 0.14% higher at 98.99.

In corporate news, JC Penney’s shares advanced even after the company cut its sales forecast for this year.

Walt Disney share price went up as its fourth quarter profits rose by 10% to $1.77bn, but failed to deliver on analysts' expectations.

Nvidia rallied after it said late on Thursday that third-quarter profit more than doubled.

From a sector stand-point the best performance was seen among the following industrial groups: Autos (2.76%), Hotels & Lodging 2.65%), Semiconductors (2.65%), Real estate holdings (2.13%) and Coal (2.10%).

Dow Jones - Risers

Walt Disney Co. (DIS) $97.68 2.86%
Goldman Sachs Group Inc. (GS) $203.94 1.53%
Cisco Systems Inc. (CSCO) $31.36 1.16%
General Electric Co. (GE) $30.71 0.99%
Nike Inc. (NKE) $50.77 0.75%
Procter & Gamble Co. (PG) $83.58 0.75%
International Business Machines Corp. (IBM) $161.27 0.66%
Home Depot Inc. (HD) $129.85 0.64%
Travelers Company Inc. (TRV) $110.28 0.60%
Apple Inc. (AAPL) $108.43 0.59%